It is good that we came through the recession without the levels of unemployment that the textbooks predicted. But too many have become complacent about today’s labour market. As Goodhart stresses, we have growing numbers of vulnerable workers at the bottom. Not only is pay stagnant, there are also acute difficulties for young people and serious under-employment. There are unprecedented numbers of part timers wanting full time jobs, and many working well below their capabilities and education, with inevitable knock-on effects for the less skilled.
But blaming trade unions for this misses the point. The thrust of government policy for decades has been deregulation. It was Tony Blair who boasted of the lack of labour market regulation in the UK. During this period, commentators like David Goodhart did not rush to defend the union members who were taking action to defend or extend their living standards.
Lax banking supervision has had obvious and far-reaching consequences for the UK economy—but deregulated labour markets also drove the 2008 crash. Growing inequality and the falling share of economic output going to wages meant that instead of earning their keep, too many workers were forced—or even encouraged—to borrow to maintain their living standards. A recent Trades Union Congress (TUC) report found that as wages fell the money saved was not diverted into investment and did not correspond to a general increase in profitability. The outcome of this squeeze in wages was finance sector profits.
In Anglo-Saxon economies labour market flexibility means easy hire and fire. Its epitome is the zero-hours contract in which employers do not even have to sack someone to end their job. Unions could no doubt improve their membership and appeal for those on the lowest pay, but this group of workers is very hard to organise. Workers on such contracts are desperate not to offend a boss who can vary their income and working hours at whim.
Much of Europe has opted for a form of labour market flexibility that combines high skills and employee adaptability with decent pay and job security. We need the same in the UK.
There is no single policy that is going to boost wages in the UK. Active industrial policy is key and unions are already playing a part in this. As Michael Heseltine’s work shows, this now has wide support and great potential, but cannot be switched on overnight, particularly after so many decades when it was out of fashion.
But if better jobs are the secure route to higher pay in the long term, there is still much we can do now. Wage led growth can play an important role in securing sustainable recovery. New TUC research shows that a mix of policies can help to narrow a quarter of Britain’s £85bn wage gap.
A modest increase in the minimum wage to restore its 2009 level would take it to £6.60 without a big effect on employment. Many more employers could easily afford the living wage. And while there are employment trade-offs involved in raising the minimum wage, there are clearly sectors that could afford more.
This adds up to practical pre-distribution. Far from bringing us into conflict with Labour, together with the quest for full employment it constitutes a shared agenda.
Many say that the balance of power swung too far towards unions in the 1970s. Unions disagree, but people who propound this line never seem to say where the balance should lie. It is good to see at least one major commentator now saying that it swung too far the other way and we now need an increase in union power.
There is a clear role for unions in helping to bring about these changes to employment and pay in Britain. These changes—like the unions that advocate them—are needed now more than ever.
